Bollinger Bands Width (BBW) indicator

Bollinger Bands Width (BBW) is a technical analysis indicator that is based on the original Bollinger Bands indicator. It measures the distance between the upper and lower bands of the Bollinger Bands as a percentage of the middle band.

The formula for Bollinger Bands Width is as follows: BBW = (Upper Band - Lower Band) / Middle Band x 100

In this formula, the upper and lower bands are the two standard deviations away from the moving average in the original Bollinger Bands formula. The middle band is the moving average.

The BBW value represents the width of the Bollinger Bands. When the bands are narrow, it indicates that the security is experiencing low volatility, while a wide band indicates that the security is experiencing high volatility.

Traders use Bollinger Bands Width to identify potential buy and sell signals, as well as to monitor market volatility. When the BBW value is low, it may indicate that the security is consolidating and that a potential breakout is imminent. Conversely, when the BBW value is high, it may indicate that the security is experiencing high volatility and that a trend reversal may occur.

Traders may also use the BBW indicator in conjunction with the Bollinger Bands %B indicator to confirm potential trend reversals. For example, if the BBW value is high and the %B value is above 0.8, it may indicate that the security is overbought and that a potential reversal may occur. Conversely, if the BBW value is low and the %B value is below 0.2, it may indicate that the security is oversold and that a potential bullish reversal may occur.